"Almost Cataclysmic": Barclays Reveals Which Restaurants Are Most Exposed To Collapsing Malls

Tyler Durden's picture

We've spent a lot of time this year discussing the complete collapse of mall-based retailers, a collapse which has resulted in more store closures in Q1 2017 than all of 2016 and will likely claim more victims by the end of this year than any year since the great recession nearly a decade ago.  Here are a couple of recent examples:

But those mall-based apparel companies aren't the only ones suffering the dire consequences of collapsing mall traffic.  For years, the casual dining space has become more and more saturated with new concepts resulting in thinner and thinner margins for the restaurant industry.  Now, with foot traffic in malls collapsing these same restaurants are about to experience the brutal realization that declining traffic, massive fixed costs, rising minimum wages and razor thin margins aren't a great combo. 

Thankfully, Barclays' restaurant team, led by Jeffrey Bernstein, has identified which publicly-traded restaurants are about to get screwed the most.  Here's a summary:

Of the large publicly-traded casual dining chains, Cheesecake Factory 'wins' the 'most screwed' award with 93% of their locations heavily dependent on mall traffic.

 

Meanwhile, proving they went full mall-tard (something you should never do, btw), CAKE's second largest casual dining concept, Grand Lux, is also over 90% dependent on mall traffic. 

 

Here are more details from Barclays:

Cheesecake Factory (CAKE) operates 90%+ of their stores in a location we define as mall dependent. To be fair, CAKE is often viewed as a destination, with its own separate entrance, and therefore less mall-dependent. And most are in ‘A’ malls which house high-end retailers that draw a more affluent consumer. But the consumer shift to on-line shopping is less about affluence, and more about a change in behavior.

 

BJ’s Restaurants (BJRI) & Olive Garden (DRI) are the only other portfolio leading casual diners with an outsized percentage of stores mall dependent, at ~60% & ~50%, resp. With that said, we are Underweight BJRI & Overweight DRI. Importantly, this analysis is just one component of a mosaic when formulating our ratings. BJRI is expanding from regional to national, and competes within a very competitive varied menu segment, both of which pose challenges. Olive Garden is already a strong national brand, and the only one competing within the Italian segment, while offering a strong value platform.

 

As for the remaining casual diners, all operate 25-40% of their stores mall dependent. These include the three steak chains, Outback (BLMN), Texas Roadhouse (TXRH) and LongHorn (DRI), all at 30-40%. We are Overweight all three. Steak concepts are more special occasion, and therefore less mall-reliant, with resilience demonstrated by a positive comp for all in 1H17. Otherwise, Buffalo Wild (BWLD) is also Overweight. While comps have eased and wing prices are elevated, the brand is introducing a new c-suite, has three new activist board members, & potential for large refranchising / cost cutting. Lastly, Chili’s (EAT) also competes within a very competitive varied menu segment, and is viewed as over-stored, and is now looking to redefine a ‘very clear identity’.

Finally, here is a list of states that should probably start preparing for higher restaurant layoffs in the near future...yes, we're looking at you and your $15 minimum wage California.

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knukles's picture

They can be repurposed to gnarly skateboard parks, which says tons compared to Hillary's 3rd shot at the White House.
Decisions decisions.

junction's picture

Those malls are victims of the disastrous economic and war policies of the United States since George Bush effectively became president after the attempted assassination of Ronald Reagan.  The clientele of malls skews to young adults and families.  How can many college students afford to buy stuff at malls when their college costs have gone up fivefold for tuition and eightfold for books over the past 30 years. Most colleges now are there to provide jobs for top administrators who make $500,000 a year and up plus benefits for doing no educational work.  The same applies to hospitals, where top adminstrators never retire, no letting go of their multi-million dollar yearly salaries for attending fund raising dinners.  Over $3 trillion spent on Bush family/NWO wars has wrecked not only the USA economy but the hundreds of thousands of soldiers cycled in and out of war zones, exposed to dust from depleted uranium rounds, burn pits and freely available heroin.  Those zombie malls are just a glaring outward sign of the American zombie economy.

Handful of Dust's picture

College costs axed yutes while Obamacare costs for zero health care destroyed middle age an dolder in th eprivate sector.

Giant Meteor's picture

That's the signpost up ahead—your next stop, the Twilight Zone, which is where things stand now.

Nolde Huruska's picture

Meh! I haven't eaten in any of those restaurants in over 3 years. But do wake me up if Denny's gets in trouble.

Kidbuck's picture

I wish I could afford to eat out. But my retirement check is $500 bucks a month lighter thanks to Obuttfuck care.

BetterRalph's picture

I had plenty of money, I ate out 5 of 7 days a week 365 days a year. I say You will never be able to afford to eat out.

Even if you could do "all you can eat chocolate sugar bunnies" for 99 cents what do you think happens to your arteries and heart forty years of this down the road?

You never could afford to eat out, so don't sweat it.

Maybe it doesn't make sense to you now, but I blame the FOOD pyramid for that.

JRobby's picture

Homeless housing.

Booming "need"

JustPrintMoreDuh's picture

So time to bet the farm on ChesseCake Factory?

The Cooler King's picture

Time to bet the farm on opportunistic 'Zumba Instructor' squatters & their ghetto blasters & clientele who look like Peggy Joseph.

Arnold's picture

Wut about Chunky Cheese?

Random brain cell firing.

The Cooler King's picture

They're converting their TOKENS to BITCOINS, so, presumably, they're gonna be ok

BetterRalph's picture

I'll buy that farm, keep the cheesecake

Cautiously Pessimistic's picture

Things I have been thinking of doing with a cheap, vacant, indoor mall:

The most awesome indoor airsoft destination...EVAR.

It would make for one badazz indoor haunted house part of the year.

Subdivide the crap out of it and rent living quarters to broke senior citizens and open air funds solicitors (bums).

Any body else got some good ideas?? 

azusgm's picture

Training venue for crisis actors.

https://fellowshipoftheminds.com/tag/adam-swart/

With some styrofoam statues, you could have a film production studio.

Bernie Madolf's picture

Just change name to Carbon Storage and enjoy free monies from Super Joe

haha-clinton-dix's picture

People may leave, but their germs and DNA stay. Hook up AI, gene sequencing and CRISPR and just let it run and see what happens.

curbjob's picture

Grow factories to feed the Flockbooks need to alter their dismal reality. 

Mechanicals are all in place and the electrical supply is adequate for grow lighting. 

There's usually a cardboard compactor that can be reutilized for baling close to a loading dock for transport.

Absolutely no  reason weed should cost more than arugula . 

duo's picture

Indoor farms and drone racing.  That would be cool.

deimos178's picture

wouldn't take much to make it an ideal paintball or training place for cops.

jamesmmu's picture
Maybe ‘this time is different’ but, if not (and it never is), then stocks are still priced for perfection and the economy has already rolled over.

http://investmentwatchblog.com/maybe-this-time-is-different-but-if-not-a...

lester1's picture

Retail malls are on their way out. In 5-10 years many of them will be rehabbed as private schools and learning centers to compete against failing/liberal public schools.

 

School vouchers will make this possible and it will be awesome! 

 

 

Anteater's picture

Well, it says right on my public school teacher ID lanyard,

"You will know all your students' names, all their strengths,

and will differentiate your lesson plans to those strengths."

 

OK, it's just: "Every student by name, strength and need."

Imagine the level of effort to differentiate for 30 students,

x five classes per day, then do it over again for tomorrow,

and again the next day, for 222 days, before you can sleep.

 

I didn't have a ID lanyard in private school, just a name tag.

The principal said, "Your job is to pass all of your students."

So I had test, then dumb-down, test, then dumb-down, test.

At last I got all of them to pass it by going over the answers

before the test. I turned in the test scores, and my name tag.

DeVos would call that a 'success'. 100% passing, no pension!

 

School vouchers are just a 'War on Education' Big MIC scam.

 

WINNING!! https://image.ibb.co/gno5ba/winning_monkey.jpg

 

stacking12321's picture

actually, the "education" industry is itself a scam.

there's no reason anyone should be made to pay for public forced indoctrination services (schools).

actual learning and a love of knowledge is very valuable, kids shouldn't have their natural curiosity crushed out of them; the public school system is a harm, it's not an asset.

techpriest's picture

The public schools are the parochial schools of the Left.

Offthebeach's picture

Government in charge of mental patterning.   That will be good.

shovelhead's picture

That's funny.

You make up a good story. Totally unbelieveable, but a nice lie attempt anyway.

lester1's picture

Chicago Public Schools currently  spend $17,000 a year per student. (Yeah I know that's insane) and their students are failing big time. Think of how much good could be done if that money were used for vouchers. 

 Use some of those vacant malls, rehab them, and bring in non union conservative teachers with talent.   Teach morals and values, no trannies in girls bathroom! and bring back trades classes too. Urban farming, cooking, etc..  Give parents an alternative to failing public schools and actually teach kids, not make them "victims"

 

Rham Emanuel, are you listening??

rejected's picture

$100 per student,,, $16,900 for pensions.

Sam Spayed's picture

"Rham Emanuel, are you listening??"

He might be, but it doesn't matter. Your suggestions don't fit the far left agenda.

Maghreb's picture

Problem is there are already low birthrates. How much fucking education can the U.S afford?

waspwench's picture

Don't be so silly.   There is no intention to educate anyone.   What is needed is indoctrination.   There are so very many misguided citizens who require re-educating.   There is an endless need for re-education.   Everything will be taken care of.   There is a plan.   All will be well.   Don't worry.   Be happy.   Take your soma and attend the required re-education classes.   :)

NurseRatched's picture

Would anyone miss Olive Garden if they disappeared?  Eating their "Italian food" is just like living in Italy, right?

HRH Feant2's picture

Italian food is so easy to make. It amazes me that people pay for the crap Olive Garden peddles.

Arnold's picture

Carrabas was good in Florida, sucked in Hilton Head.
Not mall dependent as far as I can tell.

Pernicious Gold Phallusy's picture

People just love endless bread sticks and mushy pasta with red sugar sauce.

Last of the Middle Class's picture

Best microwavable frozen dinner you can get.

Able Ape's picture

The chefs at Olive Garden trained extensively for years and can competently operate any microwave in the Universe

Kidbuck's picture

I wouldn't miss them but the few times I've been there I enjoyed the food, as did my dad who spent 3 years in Italy after WWII. You food snobs must not have grown up hungry or you would appreciate that anything that fills you up is a blessing.

Nostradumbass's picture

"anything that fills you up is a blessing."

Um, OK.

Glyphosate for everyone.

Nostradumbass's picture

I refer to Olive Garden as Wheat Garden - that is the main ingredient in every dish.

shovelhead's picture

Maybe in the North African sections of Italy.

waspwench's picture

I ate there once.   It was unavoidable.

Green2Delta's picture

All of those restaurants, Outback excluded, can go fuck themselves. I've been to two Yardhouse restaurants and that is some truly overpriced bullshit. How they're still in business is beyond me. 

dchang0's picture

Expense accounts.

The most expensive meals I've eaten lately have been on corporate expense accounts. There was no way I'd spend that kind of money if I had to pay out of my own pocket. 

The other diners there were also on business lunches or dinners. There are some industries that are still doing quite well (hint: the majority of businesses around these restaurants I speak of are defense/aerospace).

I imagine there are also a lot of gov't expense accounts being abused. Even though most gov'ts don't have much cash to spare, there will be some departments that are flush with cash to waste.

Antivenom's picture

Exactly, the majority of my dining out was directly related to travel related to work.

Then telecommunications made it easier to meet with districts without so much travel.

Still travel done to remote areas that have slim pickings for dining, TGIFs, McDonald's, and a few small family run. I try to support the little guys as much as possible.

shovelhead's picture

One thing you learn in the chain restaurant business is to never eat in a chain restaurant.

Even with an expense account.

All the "cleanliness" is in the front of the house. The managers don't give a shit about what the customers never see even when they're taught how to keep the back clean. Clean costs money. Corporate cares about cost per unit.

Half of the chain restaurants rely on the roaches to keep the range grease-traps clean. When they fall they just flick them off the steak into the range. The other half have to pay the big bucks to have the haz-mat suits spray contact killer on the nests before they degrease the hoods to keep from blowing the live roaches all over the place with the pressure washers. At least the dead ones you can mop up.

Watching them clean a range hood will cure you of going out to eat.